Healtheon Buys Transaction Processor

Healtheon/WebMD Corp. Monday bought Quintiles Transnational Corp.’s
health care transaction branch for $2.5 billion.

Healtheon will exchange 35 million shares of its
stock and $400 million cash for the ENVOY unit. Quintiles will issue Healtheon/WebMD a warrant to purchase up to 10 million shares of
its common stock at $40 per share, exercisable for four years. As part of
the deal, Quintiles (QTRN)
will own about 16 percent of Healtheon/WebMD.

With this acquisition, Healtheon/WebMD (HLTH)
will process almost 2 billion transactions a year for its health care
customers. ENVOY is the largest processor of healthcare EDI transactions in
the U.S., including pharmacy, medical, dental and patient statement

Quintiles and Healtheon/WebMD also inked a strategic alliance to develop and
market a suite of products and services for the pharmaceutical industry to
improve the speed and efficiency of drug development, physician detailing
and delivery of direct-to-consumer health care information. Healtheon/WebMD
will eventually create a cyber-detailing channel on WebMD immediately
available to Quintiles’ contract sales organization with access to the
pharmaceutical industry.

Additional terms and features of the agreement include:

  • Quintiles will provide Healtheon/WebMD with development funding of up
    to $100 million over the next 18 months to develop Web- based products and
    services. Three areas of Internet products are targeted: drug development,
    physician detailing and direct-to-consumer information delivery

  • Healtheon/WebMD will be the exclusive provider of Quintiles’ Web-
    enabled services

  • Quintiles will have exclusive rights to de-identified ENVOY transaction
    data, securing for Quintiles an important element of its acquisition of
    ENVOY last year.

  • Healtheon/WebMD will enter into a data services agreement in which
    Quintiles will be the exclusive licensee across a wide spectrum of
    healthcare for de-identified data available from Healtheon/WebMD

  • Quintiles Transnational Chairman and Chief Executive Officer Dennis
    Gillings is expected to be appointed to the Healtheon/WebMD board of
    directors. The senior management team of ENVOY is expected to remain with
    the company to run the ENVOY operations from Nashville, where the company is

“The acquisition demonstrates that we are executing on our business plan of
securing new customers and strategic partnerships to help us drive our
transaction volumes, expand our base of physician users and enhance the
breadth and functionality of our offerings,” said Jeff Arnold, chief
executive officer of Healtheon/WebMD.

In related news, Healtheon/WebMD and IDX
Systems Corp.
Monday forged an agreement in which the healthcare giant
would implement IDX’s (IDXC)
connectivity to have direct access to over 200,000 physicians’ desktops.

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